Scenario 9.3
Tom Bergman,owner and operator of the Earplug Superstore,is reviewing the costs associated with the store's best-selling hearing aid,the BZ15.The data available to Mr.Bergman concerning this device follow.
Demand = 25 units/week
Order cost = $3/order
Holding cos = $1.50/unit/year
The Earplug Superstore operates 52 weeks a year.
-Use the information in Scenario 9.3.If Tom orders at the economic order quantity,how many units does he order at a time?

Question

Quizplus · Accepted Answer

The economic order quantity (EOQ) is the optimal quantity to order at a time to minimize the total inventory costs. The EOQ is given by the following formula:EOQ = sqrt((2*D*O)/H)where:D = demand in units per yearO = ordering cost per orderH = holding cost per unit per yearIn this case, the demand is 25 units per week, or 1300 units per year (25 units/week * 52 weeks/year). The ordering cost is $3 per order, and the holding cost is $1.50 per unit per year. Substituting these values into the EOQ formula, we get:EOQ = sqrt((2*1300*$3)/$1.50) = 75 unitsTherefore, Tom should order 75 units at a time to minimize his total inventory costs.

Scenario 9.3 Tom Bergman,owner and Operator of the Earplug Superstore,is Reviewing the Reviewing